Correlation Between Masterwork Machinery and Bomesc Offshore

Can any of the company-specific risk be diversified away by investing in both Masterwork Machinery and Bomesc Offshore at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Masterwork Machinery and Bomesc Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Masterwork Machinery and Bomesc Offshore Engineering, you can compare the effects of market volatilities on Masterwork Machinery and Bomesc Offshore and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Masterwork Machinery with a short position of Bomesc Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masterwork Machinery and Bomesc Offshore.

Diversification Opportunities for Masterwork Machinery and Bomesc Offshore

0.85

Correlation Coefficient

Masterwork Machinery  Bomesc Offshore

Very poor diversification

The 3 months correlation between Masterwork and Bomesc is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery and Bomesc Offshore Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bomesc Offshore Engi and Masterwork Machinery is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Masterwork Machinery are associated (or correlated) with Bomesc Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bomesc Offshore Engi has no effect on the direction of Masterwork Machinery i.e., Masterwork Machinery and Bomesc Offshore go up and down completely randomly.

Pair Corralation between Masterwork Machinery and Bomesc Offshore

Assuming the 90 days trading horizon Masterwork Machinery is expected to under-perform the Bomesc Offshore. In addition to that, Masterwork Machinery is 1.95 times more volatile than Bomesc Offshore Engineering. It trades about -0.46 of its total potential returns per unit of risk. Bomesc Offshore Engineering is currently generating about -0.39 per unit of volatility. If you would invest  1,237  in Bomesc Offshore Engineering on October 14, 2024 and sell it today you would lose (138.00) from holding Bomesc Offshore Engineering or give up 11.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Masterwork Machinery  vs.  Bomesc Offshore Engineering

Masterwork Machinery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bomesc Offshore Engi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bomesc Offshore Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bomesc Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Masterwork Machinery and Bomesc Offshore

The main advantage of trading using opposite Masterwork Machinery and Bomesc Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masterwork Machinery position performs unexpectedly, Bomesc Offshore can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bomesc Offshore will offset losses from the drop in Bomesc Offshore's long position.

The idea behind Masterwork Machinery and Bomesc Offshore Engineering pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.